The main reason why Bitcoin fees are so high right now is the surge in popularity of Bitcoin Ordinals, a protocol that allows users to store non-fungible tokens (NFTs) on the Bitcoin blockchain.
The key points are:
- The number of Ordinals inscriptions has surged, with over 1.2 million new inscriptions created from Friday to Sunday. This has led to a significant increase in the number of transactions on the Bitcoin network, clogging the network and creating a backlog of transactions waiting for confirmation.
- The congestion in the Bitcoin mempool (the network’s temporary repository for pending transactions) has resulted in miners prioritizing transactions with higher fees. Users seeking faster confirmations have had to pay inflated fees, further exacerbating the issue.
- The spike in Bitcoin transaction fees, with the average reaching over $37, is the highest level since April 2021, during the previous bull market peak.
- The high fees have proved to be a boon for Bitcoin miners, as their revenue from transaction fees has quadrupled the two-year average, reaching around $63 million per day.
- The surge in fees is seen as a reflection of Bitcoin’s scalability challenges, highlighting the need for layer-2 solutions like the Lightning Network to enable faster and more affordable transactions.
In summary, the main driver of the current high Bitcoin fees is the surge in Ordinals inscriptions, which has led to network congestion and miners prioritizing transactions with higher fees.
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